Can Cable Companies Really Succeed Selling Home Security?

Cable and telephone companies have jumped into the home security business with both legs. Those of us who have already been providing peace of mind for years (or even decades!) call these interlopers the “new entrants.” And that’s because they are just that: companies who until recently didn’t know a door contact from a dead bolt, but have decided to add home security and home automation to their “bundled” product offerings.

Posting about these new entrants has been interesting, and even a bit entertaining: it’s not every day we get to demonstrate just how hard it is to make people feel safe in their homes. And watching companies like Comcast struggle with basic issues like reliable technology and satisfactory service levels demonstrates why the new entrants are having a tough time gaining the traction they need to justify the significant investment they are making. But a recent article sheds some much-needed light on the strategies of these companies – and even provides some insight into how they are doing.

Why the New Entrants Are Here

Consumers are increasingly turning to an unlikely source to secure their homes — the cable company. Lower prices for critical components such as cameras and wireless technology have been lowering barriers to entering the $13 billion home security market, traditionally the territory of players like ADT Corp. For cable companies such as Comcast Corp and Time Warner Cable Inc., home security is another revenue stream to help rebuild margins whittled away by rising programming costs and declining numbers of video subscribers. It is also a way to put to work the billions of dollars that cable companies have invested to create high-speed video and data services over the years.

Now there’s a compelling motivation to enter a new industry: “declining number of video subscribers.” While it makes sense for the new entrants to seek new sources of revenue, protecting lives and property is proving not to be the slam dunk these companies may have expected. In fact, the CEA (Consumer Electronics Association) found in a survey that onlyone third of cable customers consider their cable company a reliable source for home security services!

Trying to Extend Customer Life

And home security subscribers tend to stick around for an average of seven or eight years, according to industry estimates, unlike the fickle cable TV subscribers who can be lured away by enticing deals from satellite and telecom rivals. Cable companies “are under pressure on their traditional lines of business so there’s some urgency added to add more revenue,” said one alarm industry participant.

Some observers peg this desire for improved customer retention as “the big reason” why the new entrants have joined the alarm industry: they see how loyal a home security subscriber can be. But then again, the best alarm companies with the highest customer retention metrics – like FrontPoint – have earned that loyalty with the most advanced technology, excellent service, and a sterling reputation to show for it. Compare that to the conventional view of Comcast andTime Warner – reportedly two of the ten most hated consumer brands in the US.

Some Hard Numbers

Comcast, the largest U.S. cable operator with 22 million video subscribers, entered the security market in 2010 and has not revealed subscriber numbers.

Time Warner Cable, which serves 12 million video customers, has 30,000 subscribers for its security business, incoming Chief Executive Rob Marcus said at a recent investor conference. The company this week started selling the service in New York City, its last big untapped market for home security.

Adam Mayer, vice president of Time Warner Cable’s “Intelligent Home” unit, said the company may create special packages for apartments to crack into wider parts of the New York market. Privately held Cox, which does not say how many subscribers takes its product, said it plans to take a “healthy percentage” of a potential $1 billion market in the areas in which it operates, a spokesman said.

If these companies were as successful as they need to be – or as I suspect as they hoped to be – there is a good chance they would all be sharing their numbers. Clearly that anticipated success may not be the case.

The Harsh Reality

Cable operators will have to outmaneuver incumbents that include ADT, Protection 1, Monitronics, with years of experience, infrastructure and name identification. ADT alone has 6.5 million customers, about a quarter of the U.S. market. Price is emerging as a key battlefield, with Comcast, Cox and Time Warner Cable offering discounts if customers combine home security with other services. That puts the prices for home security at $30-$50 per month, slightly below what ADT charges for its new “Pulse” product.

Even with the price difference, Imperial Capital analyst Jeff Kessler said it could take years for cable companies to gain consumers’ trust. “People’s perception of a cable company is that they’ll be there between the hours of 8 and 5 next week. You can’t have that if you are expecting the police to come in 5 or 6 minutes,” Kessler said. He said the larger security players will weather the new competition since there will always be customers who prefer a product from a dedicated security company.

Stakes are Higher with Home Security

The question remains whether the cable and telco companies new to home securityhave what it takes to compete. And for us dedicated, long-time security industry professionals, it’s a bit of déjà vu all over again – watching some of the same players enter (and possibly leave) our sector of the economy with a horde of unhappy customers in their wake. What these companies don’t seem to grasp is that peace of mind really is a different proposition: just because you have an Internet “pipe” into a consumer’s home, that doesn’t mean homeowners are ready and willing to sign up for your latest “bundled” offering… especially when you are not doing a terribly good job with your current (less critical) services. Frankly, the stakes are that much higher when you are protecting people’s homes and families.

Cellular is Safer – and More Reliable

It’s also interesting to note that every single one of these new entrants, without exception, uses the cellular network for primary or backup transmission of alarm signals. Yup: they all use cell, because they know that cellular is safer. However, most of them use the Internet for transmitting a majority of their overall signals from the home, which is why the systems are referred to as “IP-enabled.” And as regular readers of this blog know, the best home security systemsrely on a safer and more robust cellular connection for everything – not just for alarm monitoring, but for the advanced interactive services as well.

As one of the few truly nationwide “real” alarm companies that is focused on protecting your home and family, FrontPoint is happy to see the increased consumer awareness of interactive monitoring services and home automation that new entrants bring to the general public – especially since are exactly the advanced features that FrontPoint has offered since our inception in 2007. We also know that the more people research their options, the more they are choosing a proven provider like FrontPoint. As the leader in wireless home security, we specialize in the best protection: that’s why we’re the #1 ranked alarm company in the US.FrontPoint systems are safer, smarter, simpler, more affordable, and virtually impossible to defeat. And, unlike the case with some of our wannabe competitors, you’ll be thrilled with our service.

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➥ HighMark Security is an Professional Security and Surveillance Solutions Supplier in Vietnam, we provide security solutions and products such as security cameras, security DVRs, wireless cameras, alarm security system, GPS system , smart home, video baby monitors for home and business surveillance…